MBS Day Ahead: Bond Market Rally at Crossroads; Limited Data; 10yr Auction

Wednesday could be somewhat interesting for bond markets.  At the moment, we'll have to focus exclusively on Treasuries as MBS rolled last night, throwing off the shorter term technical merit (a monthly occurrence that suggests Treasuries as the technical focus for the most part anyway). 

There we see yields have moved back almost perfectly to their 21-day moving average, which is also the middle Bollinger Band (one of the most mainstream technical studies).  If we were going to talk qualitatively about the significance of a return to "mid-bollinger," we might say this is the point at which a move in one direction has gone in the other direction enough to consider doing something else.

In other words, rates were rallying for the first 5 weeks of 2014, and now they've been losing ground for a week.  The amount they've lost is just getting big enough to serve as a good correction/consolidation for that 5 week trend of improvement.  As such, if rates bounce, we might be able to scrape together some hope of the rally continuing.  If we don't get that bounce, however, the implication is that the 5 week rally was actually the consolidation/correction, and we're now heading back to the longer term trend higher in rates.

The calendar is limited today with only the 10yr Auction at 1pm as any sort of market moving event.  Apart from that, Fed's Bullard speaks at 835am.  Keep in mind MBS prices will be opening much lower today due to last night's roll.